Dubai: Rent gains at locations further away from Dubai’s main residential districts are accelerating in the final weeks of 2022, with leases for homes in Jebel Ali up by a sizeable 4 per cent in November alone. The average rent for a relatively new two-bedroom unit is above Dh60,000, and with the possibility of further increases in the first quarter of 2023.
Apartments at Motor City too are recording a significant increase in demand, which is reflected in a 2.6 per cent increase in rents month-on-month in November, based on the latest updates from the consultancy CBRE. The average 2-bedroom rental at Motor City, where the master-developer Union Properties announced new offplan launches recently, is at over Dh80,000. (The same trends are in play at the upscale Green Community in Dubai Investments Park, where in November, the hike on new lease agreements was averaging 4.5 per cent.)
Dubai’s mid-market locations have picked up the baton when it comes to sharp rental increases, a pattern that started to show up strongly since September as residents - old and new - sought out ways to keep their rental payments in cheque. “Those tenants who could not renew their leases - and thus keep the rental increase within a certain range - had to look to the outskirts of the city to find new homes within their budget,” said an estate agent. “Plus, with a new contract, they hope to lock in their rents for 2 years.
“Jebel Ali and Dubai South keep benefiting from this, and which is why rents too have started to show sizeable increases in Q4-22. Expect more rental action in these locations during 2023, and with the Expo City being the other factor.”
JVC is an exception
Going by the CBRE data, rent increases in November at JVC have been muted, with the month-on-month gain pegged at 0.9 per cent. Two-bedroom units there are listing for under Dh60,000. “One reason JVC rentals have not risen significantly is because of a steady pipeline of new handovers, both in Jumeirah Village Circle and in areas such as Al Furjan and Meydan,” said the agent. “But this could soon change if new project completions and handovers were to slow down. JVC could be the one to watch out for in 2023.”
Will landlords stick with short-stay rentals?
Through 2022, rental gains in Dubai have been in the 15-35 per cent range, with the upscale communities and neighbourhoods dominating the first nine months. By November, the month-on-month increases at locations such as the Palm (up 0.4 per cent). Jumeirah (down 2.3 per cent), Dubai Marina (up 1.2 per cent), and JBR (up 1.7 per cent) have slowed down, according to CBRE.
Yet, super-prime Downtown Dubai rents gained 4.4 per cent while those at The Old Town ended November up 4.9 per cent. Business Bay remains the other frontrunner, with a 3.3 per cent upturn over October.
Some market sources say that rental increases could cool slightly in the coming weeks, if more landlords decide to switch their rental units from short stays to annual leases. “A lot depends on landlord expectations - 2022 was exceptional for short-stay rentals (because of the FIFA World Cup and end-of-year demand) but 2023 could turn out to be more sedate,” said the owner of a property management company.
“Some landlords will want to go back to the security provided by annual rental contracts. If that happens a lot, then locations such as Dubai Marina and Downtown could free up more units for one-year rentals. This might stabilise rent increases.”
What should tenants do?
Those tenants still in the market for a new rental property still have ways to keep their payouts in check. Depending on the location and building, they can still get those 1- or 2-month rent-free contracts.
Interestingly, some landlords are even offering end-of-year discounts, of up to 5 per cent on top of a 2-month rent-free. Only condition is they need to make up their minds and sign the contracts before December 31, 2022.
Or, they could chase rental options further away from the city centre.